Biden administration threatens tariffs on UK goods in 'tech tax' row

The US has warned it could put tariffs of up to 25% on a host of UK exports in retaliation for a UK tax on tech firms.

Ceramics, make-up, overcoats, games consoles and furniture could all be hit, according to a list published by the Biden administration.

The duties are designed to raise $325m (£235.8m), the amount the US believes the UK will raise from US tech firms.

A UK government spokesperson said it wanted to "make sure tech firms pay their fair share of tax".

They added: "Should the US proceed to implement these measures, we would consider all options to defend UK interests and industry."

Washington is pressing ahead with the action, initiated under President Donald Trump, and has scheduled hearings on the list.

It argues the recently introduced digital services tax - which taxes tech firms on their revenues - has "unreasonable, discriminatory, and burdensome attributes".

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Such actions have proceeded against similar taxes in India, Austria and Spain, but action against the European Union as a whole was dropped.

The US Section 301 action is designed to apply domestic political pressure within the UK and other countries over the imposition of such taxes.

The UK and US held talks about the digital services tax on 4 December, and UK government sources stressed that the tariff list was being seen as procedural, rather than an escalation.

The tariffs are now subject to a consultation in the US over the next few weeks.

Burberry's famous trench coats would be affected

'Hugely disappointing'

UK ceramics are on the US Trade Representative's list, including certain tiles, bathroom ware like sinks and bidets, as well as ceramics for laboratory uses.

About £17m of these products were exported to the US in 2020, and £24m in 2019 before Covid.

Trade group the British Ceramic Confederation said it was "monitoring developments closely, working with UK officials".

Meanwhile Adam Mansell, head of the UK Fashion & Textile Association (UKFT), called the threat to UK-made overcoats "hugely disappointing", noting the US had only removed separate tariffs on other types of fashion goods, such as British cashmere last month.

"At a time when we are trying to start discussions over a UK-US trade deal, it is extremely important that both governments get around the table to remove this threat as soon as possible," he said.

"With the industry still struggling with the impact of Covid-19 and understanding the new trade arrangements with the EU, an additional burden on our exports couldn't come at a worse time."

'Public frustration'

At the Budget, the Office for Budget Responsibility calculated the digital services tax would raise £300m in the current financial year, and as much as £700m in future years.

Brought in last April it taxes at 2% the revenues - not profits - of search engines, social media services and online marketplaces which derive value from UK users.

It followed years of claims in Europe and elsewhere that big tech firms do not pay enough tax in the countries where they operate.

Last August, Facebook agreed to pay the French government €106m (£95.7m) in back taxes to settle a dispute over revenues earned in the country.

Earlier that year, Facebook boss Mark Zuckerberg said he recognised the public's frustration over the amount of tax paid by tech giants.

'Temporary'

A UK government spokesperson said: "Like many countries around the world, we want to make sure tech firms pay their fair share of tax. Our digital services tax (DST) is reasonable, proportionate and non-discriminatory.

"It's also temporary. We're working positively with the US and other international partners to find a global solution to this problem and will remove the DST when that is in place."

There are signs the Biden administration wants a more conciliatory relationship on trade with the UK than Donald Trump did.

Last month, Washington agreed to suspend tariffs on UK goods, including single malt whiskies, that were imposed in retaliation over subsidies to aircraft maker Airbus. However, the UK is still lobbying the US to drop duties on British steel brought in in 2018.